By Matthew Brown Nov. 11 (Bloomberg) -- European 10-year government bonds declined as Germany auctioned 5 billion euros ($7.5 billion) of bunds and stocks rose, eroding demand for the safest assets. The drop pushed the yield on the benchmark 10-year bund up from within 3 basis points of the lowest level in more than a week as the MSCI World Index of shares gained 0.5 percent. Credit Agricole SA, France’s third-largest bank, posted better- than-forecast earnings and China reported rising industrial production in October. “Equities have taken a bounce and bunds are reversing some of the gains that we have seen over the last few sessions,” said John Davies, a fixed-income strategist in London at WestLB AG. The yield on the new benchmark 10-year note rose 4 basis points to 3.38 percent as of 12:40 p.m. in London. The 3.25 percent security due in January 2020 fell 0.34, or 3.4 euros per 1,000-euro face amount, to 98.92. Ten-year notes fell across Europe, with the French 10-year yield rising 4 basis points to 3.60 percent, and the Spanish bond yield adding 3 basis points to 3.83 percent. Germany plans to sell a record 329 billion euros of bonds and bills this year, up from 220 billion euros in 2008, as it seeks to fund stimulus programs to help boost growth. Demand at the German auction was 1.4 times greater than the amount of securities offered, compared with an average of 1.6 at the previous three sales. Portugal sold 1-billion euros of 3.6 percent notes maturing in 2014, with a so-called bid-to-cover ratio of 3.4. Exiting Recession Germany, Europe’s largest economy, exited recession in the second quarter along with France, while the euro-region is expected to post third-quarter growth in a report due Nov. 13. Most EU member states should start withdrawing stimulus measures from 2011, European Union Economic Affairs Commissioner Joaquin Almunia said today. The Czech Republic, Slovakia and Slovenia have until 2013 to trim their budget deficits to below 3 percent of gross domestic product, the EU said in deficit reports issued today in Brussels. Spain, Ireland and the U.K. have adopted “effective action” to counter budget deficits and rising state debt, while recommendations were not “adequately applied” in Greece, Almunia said. The yield on the Greek 10-year note rose 3 basis points to 4.68 percent. German government bonds have lost investors 0.01 percent since the beginning of October, compared with a 0.3 percent loss for U.S. Treasuries and 1.3 percent for U.K. gilts, according to Merrill Lynch & Co. indexes. To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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